When you’re a renter, you may be required by your landlord to purchase a renters insurance policy in case something happens to you, any guests, or the property during the term of the lease. This requirement can apply to any property, from an entire single-family home to an apartment in a 200-unit building.
Even if the stipulations of your lease don’t require renters insurance, it’s not a bad idea for you to purchase a policy anyway to protect yourself and your assets. Owners insurance will cover your landlord if something happens, but it typically won’t do anything to help you, the renter, get your life back on track.
The good news is that renters insurance is very affordable–often less than $20 a month for basic coverage. However, it is not a “one size fits all” product. It’s important to choose a policy with coverage calibrated specifically to your needs.
The best place to start is by looking at the industry standard HO4 ISO form, a basic renters insurance policy put together by the Insurance Services Office, which specializes in a broad range of advisory insurance policies. Most companies that offer renters insurance will provide an HO4 on the website to get you started.
Using this policy as a baseline, consider what type of coverage makes the most sense for you. As with all insurance, your overall cost is dependant on your level of coverage, as well as risk factors assessed from both your situation and the condition of the property. And, as with other insurance, this cost is a balance of premiums (the monthly or annual lump-sum payment you make to the insurer) and deductibles (the money you pay out of pocket before your insurance pays out). In short, the higher your premiums, the lower your deductibles, and vice versa.
Assessing your Coverage Needs
It’s essential to assess your coverage needs accurately. If you underestimate your needs to drive down your premiums, you’ll find that your payout is inadequate in the event of an insurable event. If you declare that your $100,000 art collection is worth $10,000 and your home is destroyed by fire, you won’t receive the correct amount for the value of that piece.
Conversely, if your property is worth $10,000 and you have it insured for $100,000, you’ll be paying much higher premiums for a policy that will ultimately only cover $10,000 worth of property.
It’s also important to know which events you will need coverage for and what circumstances are not typically covered. For instance, if you live in Colorado, you probably will not need earthquake insurance, but if you live in a flood zone, you will need to add a flood insurance policy.
Insurance is, at its heart, a mechanism for mitigating risk. Riskier situations are more expensive to cover.
To learn more about risks, coverage options, and choosing the best renters insurance for your needs, check out the Best Renters Insurance Based on In-Depth Reviews from Consumers Advocate.